We’re excited to share with you Chainalysis’ 2022 Global Crypto Adoption Index. For the third consecutive year, we ranked all countries by grassroots cryptocurrency adoption. In this blog, we’ll cover:
What is grassroots adoption of cryptocurrency?
Think of it this way: We could easily rank countries by raw cryptocurrency transaction volume, which would give you a straightforward view of where the most cryptocurrency activity is happening. But that’s not what we’re interested in. The goal of our index is to measure where the most people are putting the biggest share of their money into cryptocurrency. While institutional activity is important to that, we also want to highlight the countries where individual, non-professional investors are embracing digital assets the most. You can read our methodology below to learn how we do that, then keep scrolling to see the top 20 of our index. You can also see where any country ranks using the interactive map above.
Our Global Crypto Adoption Index is made up of five sub-indexes, each of which is based on countries’ usage of different types of cryptocurrency services. We rank all 146 countries for which we have sufficient data according to each of those five metrics, take the geometric mean of each country’s ranking in all five, and then normalize that final number on a scale of 0 to 1 to give every country a score that determines the overall rankings. The closer the country’s final score is to 1, the higher the rank.
In order to calculate our sub-indexes, we estimate countries’ cryptocurrency transaction volumes for different services and protocols based on the web traffic patterns of those services’ and protocols’ websites. Relying on web traffic data means that usage of VPNs and other products that mask online activity, but given that our index takes into account hundreds of millions of transactions, VPN usage would need to be extremely widespread to meaningfully skew our data. Experts we interviewed for the report generally agreed that our index matches their perceptions of the markets they operate in, giving us more confidence in the methodology.
Below, we lay out our five sub-indexes and how they’re calculated.
On-chain cryptocurrency value received at centralized exchanges, weighted by purchasing power parity (PPP) per capita
The goal of this sub-index is to rank each country by total cryptocurrency activity occurring on centralized services, and to then weight the rankings to favor countries where that amount is more significant based on the wealth of the average person and value of money generally within the country. We calculate the metric by estimating total cryptocurrency received by users of centralized services in each country, and weighting the on-chain value based on PPP per capita, which is a measure of the country’s wealth per resident. The higher the ratio of on-chain value received to PPP per capita, the higher the ranking, meaning that if two countries had equal cryptocurrency value received, the country with the lower PPP per capita would rank ahead.
On-chain retail value received at centralized exchanges, weighted by PPP per capita
The goal of this metric is to measure the activity of non-professional, individual cryptocurrency users at centralized services, based on how much cryptocurrency they’re transacting compared to the wealth of the average person. We approximate individuals’ cryptocurrency activity by measuring the amount of cryptocurrency moved in retail transactions, which we designate as any transaction for under $10,000 USD worth of cryptocurrency. We then rank each country according to this metric but weight it to favor countries with a lower PPP per capita.
Peer-to-peer (P2P) exchange trade volume, weighted by PPP per capita and number of internet users
P2P trade volume makes up a significant percentage of all cryptocurrency in emerging markets. For this sub-index, we rank countries by their P2P trade volume and weight it to favor countries with lower PPP per capita and fewer internet users, the goal being to highlight countries where more residents are putting a larger share of their overall wealth into P2P cryptocurrency transactions.
On-chain cryptocurrency value received from DeFi protocols, weighted by PPP per capita
DeFi has been one of the fastest-growing areas of cryptocurrency over the last two years. In fact, as we see in the case of DEXs vs. CEXs, decentralized cryptocurrency protocols, which primarily use Ether as opposed to Bitcoin, have at times overtaken centralized services in on-chain transaction volume. Given the importance of DeFi to innovation in cryptocurrency, we wanted our adoption index to highlight countries where users are concentrating a disproportionately high share of their financial activity in DeFi protocols. For this sub-index, we rank countries by their DeFi transaction volume, with weighting to favor countries with lower PPP per capita.
On-chain retail value received from DeFi protocols, weighted by PPP per capita
Just as we want our index to incorporate the activity of non-professional, individual cryptocurrency users on centralized services, we want to do the same with DeFi. So, this sub-index ranks each country by DeFi transaction volume carried out in retail-sized transfers, weighted to favor countries with lower PPP per capita.
How our methodology changed this year
The biggest change to our index methodology this year is the addition of two sub-indexes based on DeFi transaction volume, and the modification of two other sub-indexes to include only transaction volume associated with centralized services. We did this for two reasons: First, as we explain above, to highlight countries leading the way in DeFi given its importance to the overall cryptocurrency ecosystem. Second, we wanted to address the issue of DeFi-driven inflation of transaction volume. Deposits to and withdrawals from centralized services show up in on-chain transaction volume, but transactions within those services, such as trades on a centralized exchange, do not. Centralized services track that transaction volume internally, such as in order books for exchanges, meaning we don’t have access to it. This is not the case with DeFi protocols. Because DeFi protocols are non-custodial and simply route cryptocurrency between private wallets, all DeFi transactions show up on-chain. That means that if you’re using on-chain data, DeFi protocol transaction volumes will receive a bump that volumes associated with centralized services don’t receive. In the context of this index, that could lead to us artificially favoring countries with higher DeFi adoption over ones with more activity on centralized services, even if the amount of real transaction activity is the same.
In order to address this, we decided to measure each country’s CeFi and DeFi transaction volumes separately — both in total and at the retail level — and use them as equal components of the overall index. This way, every country’s transaction volume is compared more accurately, and we can be transparent about which countries see comparatively more transaction volume in the DeFi ecosystem.